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A heritage of responsible investment
As sustainability-related issues continue to threaten the health and prosperity of society, there is a real urgency for investment managers to re-orientate and put environmental, social and governance factors at the heart of their processes.
At present, perhaps due to uncertainty of international markets, there is a prevailing short-termism in investment. This mindset presents a threat to sustainability by placing an overriding focus on short term cost benefit, rather than ethical action.
In this landscape, many investment managers become passive rather than active. As introducers of the first mutual fund in the United States, thereby democratising investment for individuals, MFS Investment Management has been committed to managing capital responsibly since its founding more than 95 years ago.
‘We believe that sustainability is synonymous with long-term investing,’ says Michael Cantara, a Senior Managing Director at MFS. ‘The pace and nature of change is accelerating around the world. Yes, that creates risks, but it also creates huge opportunities for investment.’
MFS is taking an active role in the management of its capital in order to ensure long-term returns for its shareholders and encouraging socially and environmentally responsible business practices in the companies it invests in.
By reviewing historical financials and spending time understanding why companies are able to generate the revenues they do, MFS can determine whether those returns are possible going forward. They run scenario analysis around all possibilities to ensure it can deliver consistent, reliable and long term returns for its shareholders.
While ESG factors are often seen as separate to routine funding analysis of companies, they are crucial to include when determining the long term sustainability of a company, which is why MFS engages in several ways with the companies it invests in.
‘That can be face to face meetings, consulting with the boards and executives of those companies, or making use of proxy voting,’ explains Rob Wilson, a Research Analyst with the firm.
Proxy voting gives equity security holders like MFS the ability to vote on shareholders resolutions in matters that matter to the company. They can weigh in on mergers & acquisitions, executive compensation and, importantly, on shareholder proposals which contemplate environmental, social and governance matters.
This active management supports environmental and social sustainability by prioritising and voting on what MFS believes is best for the long-term value of the stock.
‘The issues we are focussed on right now are climate change, demographics, automation and what that’s going to do to universal incomes,’ explains Melissa Haskel, Director of Fixed Income Research at MFS. ‘We identify areas of concern as well as areas of opportunity.’
MFS’s commitment to sustainability is much-needed at a time where short-termism is the prevailing mindset, encouraging investors, asset managers and both public and private sector companies to put sustainability at the fore of their minds when making investment decisions and driving a better future for all.